Correlation Between IShares MSCI and Global X

Can any of the company-specific risk be diversified away by investing in both IShares MSCI and Global X at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining IShares MSCI and Global X into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares MSCI Peru and Global X MSCI, you can compare the effects of market volatilities on IShares MSCI and Global X and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in IShares MSCI with a short position of Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and Global X.

Diversification Opportunities for IShares MSCI and Global X

0.42

Correlation Coefficient

IShares MSCI  Global X

Very weak diversification

The 3 months correlation between IShares and Global is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Peru and Global X MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X MSCI and IShares MSCI is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on iShares MSCI Peru are associated (or correlated) with Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X MSCI has no effect on the direction of IShares MSCI i.e., IShares MSCI and Global X go up and down completely randomly.

Pair Corralation between IShares MSCI and Global X

Considering the 90-day investment horizon IShares MSCI is expected to generate 2.76 times less return on investment than Global X. In addition to that, IShares MSCI is 1.18 times more volatile than Global X MSCI. It trades about 0.1 of its total potential returns per unit of risk. Global X MSCI is currently generating about 0.32 per unit of volatility. If you would invest  2,282  in Global X MSCI on September 13, 2024 and sell it today you would earn a total of  148.00  from holding Global X MSCI or generate 6.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

iShares MSCI Peru  vs.  Global X MSCI

iShares MSCI Peru

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI Peru are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, IShares MSCI may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Global X MSCI

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Global X MSCI are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Global X is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with IShares MSCI and Global X

The main advantage of trading using opposite IShares MSCI and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI position performs unexpectedly, Global X can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Global X will offset losses from the drop in Global X's long position.

The idea behind iShares MSCI Peru and Global X MSCI pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.